BNP Paribas Exane on Crocs (CROX): 'We believe results and guidance for the Crocs brand were generally in-line with expectation'
BNP Paribas Exane analyst Aubrey Tianello reiterated a Neutral rating and $128.00 price target on Crocs (NASDAQ: CROX).
The analyst comments "What happened? CROX reported a 3Q24 beat with revs of $1.06bn (+2% y/y) vs. cons of $1.05bn and adjusted EPS of $3.60 vs. cons of $3.10. We believe results and guidance for the Crocs brand were generally in-line with expectations. However, HEYDUDE guidance was materially cut again, putting pressure on shares pre-mkt. We provide thoughts ahead of the 8:30am ET conf. call. BNPP Exane View: 1Q results beat on Crocs strength, but HEYDUDE missed. 3Q rev growth of 1.6% was ahead of cons and the guide of down 1.5% to up 0.5%. This was driven by the Crocs brand which was up c.8% (vs. guide +3-5%) including 2% growth in Crocs NA vs. a guide of ~flat. HEYDUDE declined 17% vs a guide of down 14-16%, driven by wholesale down 23% and DTC down 9%. GM of 59.6% was in-line with cons. SG&A grew 19% vs a guide of low-mid 20% growth, helping drive the EPS beat. An intra-entity IP transfer drove a lower tax rate and added ~$0.24 to EPS. Net, adj. EPS of $3.60 beat cons of $3.10. Another material HEYUDE cut puts pressure on the FY24 guide. HEYDUDE revenue guidance was lowered from down 8-10% to now down 14.5% for FY24. This includes an expectation for HEYDUDE to decline MSD in 4Q vs prior guidance for an inflection to mid-teens growth. We believe that many viewed the 4Q guide as ambitious, but that there still was an expectation the brand could grow in 4Q given the lapping of easier compares (down 19% in 4Q23) and the entry into new international accounts. The cut also follows the recent addition of new brand President Terence Reilly and a new brand ambassador in Sydney Sweeney that had generated some optimism for the brand turnaround. We anticipate the focus of the conference call to be around HEYDUDE. On the Crocs side, FY24 rev guidance was updated to 8% growth from 7-9% previously. Total company revs are now expected to be up ~3% vs. 3-5% previously. The low end of EPS guidance was raised with a new range of $12.82-12.90. However, we note that EBIT dollar guidance was lowered, and the EPS raise was driven by a lower tax rate. What we’re listening for on the call: Talking points most likely to impact share price on this morning’s call include: 1) more clarity around the persistent issues with the HEYDUDE brand, 2) any changes to the strategy for HEYDUDE including international expansion now that Reilly has been in his role for ~6 months, 3) more color on Crocs North America in 4Q as it begins to lap the optical benefits of the conversion of its Amazon business to a DTC model, and 4) any early commentary on the outlook for 2025."
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Shares of Crocs closed at $111.58 yesterday.